The Indian rupee wrapped up the week on a positive note, gaining strength against the US dollar. This surge was fueled by JPMorgan’s announcement of including India’s government bonds in its emerging market index, a move anticipated to attract substantial inflows.
Closing at 82.93 against the US dollar, the rupee showcased resilience despite the dollar index hitting a six-month high in Asia, marking its tenth consecutive weekly gain.
However, importers’ dollar purchases did cap the rupee’s gains after it initially opened at 82.8225 on Friday.
JPMorgan’s decision to include India in its index will kick off on June 28, 2024, and span over ten months, potentially attracting inflows ranging from $22 billion to $30 billion, as projected by analysts.
Moreover, passive investments in Indian bonds may surge to as high as $50 billion over the next year if other foreign indexes, such as FTSE Russell and Bloomberg-Barclays, also consider including Indian bonds.
Dilip Parmar, a foreign exchange research analyst at HDFC Securities, anticipates a continuation of positive sentiment next week due to this inclusion, with a keen eye on the FTSE Russell bond index review scheduled for September 28.
Nonetheless, the rupee’s short-term trajectory is likely to remain within the range of 82.80 to 83.10. This stability may be influenced by factors like rising US Treasury yields and crude oil prices, which still pose downside risks. Brent crude oil futures have risen by 8% this month, reaching $94.12, driven by supply concerns, while the 10-year US yield reached a 16-year high of 4.50% in Asian trading.
Investors are eagerly awaiting next week’s release of US second-quarter GDP data and US core personal consumption expenditure inflation figures for August, which could further impact currency markets